Centre may sell stake in NLC, Mazagon Dock by March 31

NEW DELHI : India’s Finance Ministry may sell up to 10 percent stake each in NLC India (formerly Neyveli Lignite Corporation), Mazagon Dock Shipbuilders and Indian Railway Finance Corporation via the offer for sale route before March 31 to add to its disinvestment proceeds for FY24, a senior official said.

“The government will bring out OFS during January-March. OFS in NLC India is likely. MDL and IRFC are also there. The OFS route will be to sell not more than 10 percent government stake in these PSUs. Also, the Centre needs to space out the OFS because the market has to absorb it,” the official told.

Some stake sales, however, may be kept for next year’s disinvestment, the official said. “OFS actual implementation is not a problem. But the disinvestment target is majorly pushed by strategic sales, which have not happened in the pre-election year,” the official said.

The government targeted disinvestment proceeds of Rs 51,000 crore in FY24, of which Rs 10,051.73 crore has been garnered so far. A 10 percent sale of stakes in these three companies may fetch the government a maximum of Rs 21,200 crore, based on the current market prices of their shares.

Shares of NLC, a producer of lignite and coal with a market capitalisation of about Rs 32,585 crore, have gained 80 percent over the past three months. Mazagon Dock has a market cap of Rs 46,351 crore and its stock has risen 8 percent in three months.

IRFC shares have advanced 36 percent in the past three months for a market cap of Rs 133,756 crore.

The government owns about 79 percent of NLC’s equity shares, 85 percent in Mazagon, and 86 percent in IRFC.

OFS That Have Failed To Take Off

Stake sales planned in fertiliser companies including Rashtriya Chemicals and Fertilizers, National Fertilizers and Madras Fertilizers are unlikely in the current financial year due to lack of investor interest. The finance ministry has been trying to sell a 10 percent stake in Rashtriya Chemicals and a 20 percent stake in National Fertilizers, which are together worth about Rs 1,200 crore.

“During roadshows, the fertiliser PSUs didn’t get traction,” the official said.

Although fertiliser company stocks have done well, domestic and global investors are not keen on these state-owned companies because fertiliser prices are regulated.

An OFS in Fertilizers and Chemicals Travancore (FACT) is not feasible at this point.

“FACT is trading at a very high price with low volume, so there is a problem in that,” the official said.

Selling stakes in General Insurance Corporation of India and New India Assurance Company via OFS is also unlikely due to lack of investor interest. The plan was to offer at least 10 percent each in the two listed public sector insurance companies.

The Finance Ministry had put out feelers to investors but met with lukewarm interest.